It’s getting tight. Like, really tight.
Public school districts are standing on the edge. Healthcare premiums aren’t just going up, they’re accelerating. This isn’t about nice-to-have extras anymore. It’s about whether schools can buy books. Whether they can hire teachers. Whether the building stays warm.
A new study says we are close to a breaking point. The School Superintendents Association and ASBO International talked to 750 leaders across 42 states. The results landed in a report titled “Rising Premiums, Falling Opportunity.”
98% of those leaders said rising health costs are hurting their budgets. Not maybe. Not a little bit. Hard.
Where did the money go?
Districts are making hard choices to keep the lights on.
46% changed what employees get for benefits.
34% stopped hiring staff.
31% cut spending on tech or instructional materials.
28% lowered their insurance coverage limits.
Teachers notice. Recruitment gets harder. Retention gets worse.
Sasha Pudelski at AASA and Elleko Yost at ASBO International call it a crisis. Or say it’s close. They say if nothing changes, it becomes one quickly.
Why is it so bad right now?
Look at the numbers. For the 2025-26 year, 92% of districts spend 30% or more of their entire budget on employee insurance. That’s one third of the money. Gone.
Prescription drugs cost more. 60% of respondents cite this. Expensive treatments are being used more often. 56% cite this. GLP-1 drugs like Ozempic are driving up specialty drug costs. Another 56% mention this.
Lisa Marceau from Alpha Millennial Health has watched this for decades.
We are at the tipping point.
She says this isn’t new data. It’s an extra weight on a back that is already bent.
Good education means healthier kids. Healthy kids means better earnings later. When you strip programs out of schools to pay for insulin or chemotherapy for a staff member, the damage ripples. It hits families. It hits future earnings. It hits community health.
Zahava Stadler at New America sees the unfairness clearly.
Districts want to spend on students. They want to teach. But the money is gone before it even arrives. Health benefits eat the budget first. The costs aren’t controlled by the superintendent.
How can you judge a district’s spending when half the bill is set by strangers?
Copying the corporate playbook
Private companies are ditching health benefits. It used to be unthinkable. Now it’s a trend. Marceau warns we might see school districts do the same. Or at least, consider it.
David DeSchryver at Whiteboard Advisors says schools are pausing. Contracts are on hold. Projects are stopped. They are counting pennies to see what is absolutely necessary.
But wait. It gets worse.
Stadler points out that federal cuts to Medicaid will hurt states soon. If Washington pulls the rug, states have two bad choices. They can find new money. Or they can let people lose their health coverage.
States have to balance budgets. Where is the money?
Health care is one big bucket. Education is another.
If federal costs get dumped onto the states, they might freeze school funding to plug the gap in healthcare. Hundreds of thousands of people could lose insurance if states don’t intervene.
It is not just healthcare costs.
DeSchryver lists the rest of the pain. Gas prices. Transportation. Teacher raises. Special education needs. All rising. While revenues stay flat or shrink.
Montana got creative.
A model from Montana
Montana turned a disaster into a deal.
The Montana Unified School Trust was formed after one district in eastern Montana faced a 72% hike in premiums in a single year. The state average was 35% per year. Both are awful. 72% is catastrophic.
In 2023, education groups pushed for HB 332. The bill created a unified health insurance trust. It worked.
Seven out of the eight biggest districts joined. 180 total districts signed up. That brought 16,00 employees into the pool.
Power comes from volume.
Pudelski explains that a big pool can negotiate better rates with hospitals. It buffers against the shock of one very expensive patient.
It shifted the dynamic from panic to collective power.
Short fixes and long fights
Rachel White from UT Austin says fixing this is part of a bigger puzzle.
She points to the federal level first. Fully fund IDEA. Fund Title I. Stop asking locals to pay for federal mandates.
Then look at states. Modernize funding formulas. Make them reflect reality.
Then look wider. The whole nation needs to talk about pharmaceutical pricing.
What can schools do now?
Marceau suggests looking at flexible models.
Maybe shift from a defined benefit plan to a defined contribution one. Like moving from a pension to a 401k.
Direct primary care combined with catastrophic coverage is emerging. Self-funded plans give more flexibility.
Schools buy a lot of insurance. States with big school systems generate serious revenue for insurers. Use that leverage.
DeSchryver adds that state agencies often can’t drive this.
Local districts need to cooperate. Regional collaborations. Co-ops. Share data. Copy what works.
There are old methods. Drucker-style efficiency. Performance management. Outcomes-based contracts.
Nothing new. But everything necessary.
